Consumers are to receive €13m in compensation after Electric Ireland overcharged two million customers.

The overcharging occurred over a five-year period after the company miscalculated how much money it should be getting from a levy on electricity bills.

The €13m was gathered from a fund which is used to provide a guaranteed price for renewable energy from wind farms.

Electric Ireland miscalculated how much it was supposed to get from this Public Service Obligation (PSO) charge between 2008 and 2013.

It flagged the issue with the energy regulator earlier this year and it emerged that the company had claimed €12.97m more from its customers than it was entitled to.

The energy regulator also ruled that interest must be added to the overcharged sum, meaning that customers are to receive more than €13m. Affected domestic and business customers will receive the refund over the next 12 months via a reduction in the PSO amount on their bills.

The company had requested that the energy regulator make no specific reference to interest "as it implies wrong-doing on our part". The company did not accept it had done wrong.

However, the energy regulator said these were the rules that apply to companies claiming PSO payments from customers.

Levies applied under the PSO scheme increased by 85pc last year but the same charges on Electric Ireland bills are due to drop by an average of €4.28 over the next 12 months.

Currently, households are paying an average of €64.37 but this will drop to €60.09 for the next year, mainly due to the refund from Electric Ireland.

The Commission for Energy Regulation said there was "scope for misinterpretation" of the PSO scheme. However, an investigation found that no other electricity provider had made the same mistake.

A spokesperson for Electric Ireland last night said it welcomed "the clarity brought to this matter". "This rebate in itself will mean a reduction of approximately €2 in the annual PSO charge for a residential customer (or 33c in the typical two monthly bill) for the next 12 months," she added.